USDA Home Loan Income Calculations in NC

With USDA Home Loan income Calculations, it’s important to remember that there are really two issues that are important. One is how the underwriter actually does the calculations to see if you qualify for a USDA Home Loan. The second is what income Sources will be used to qualify for a mortgage. For instance, do they include Retirement Income, Alimony, or income from a Grad Student Stipend?

Basic Applicant Eligibility For USDA Home Loan

Have the ability to personally occupy the dwelling

Be a citizen of the United States or be admitted for permanent residency

Non-occupant co-borrowers are not permitted

Generally, borrowers must sell their existing home – although, if it is a Company Directed Relocation, and you can not logically commute, you may be able to keep the existing home.

Income Eligibility USDA Home Loans NC

USDA RD Mortgage Guidelines state that the:

“Applicants must have adequate and dependable income, typically with a history of 24 months.”

We have certainly made loans to students who just graduated with a degree, and found employment within their field of study. USDA Underwriters generally want to see the First Paystub prior to closing, so a Letter of Offer can get the loan approved… but you will usually have to receive your first pay check before the loan can close.

Contract Employees must generally have 2 full years of employment within the same company to be eligible for a USDA Home Loan in NC.

“Qualifying ratios are 29/41; however, higher ratios considered with strong compensating factors, including good credit scores (660+), stable employment history, potential for increased earnings, and ability to save.”

Compensating factors we’ve used in the past to show the “Potential for Increased Earnings” to USDA Underwriters were overtime received consistently for over 9 months, and a copy of a college degree that correlates with the current position. Remember the USDA Catch 22… Overtime that does not have a 2 year history will not be counted in the Ratios… HOWEVER, it will be calculated in the Maximum Income Numbers for that County.

Household Members: We’ve recently been asked about how to verify the number of “Household” members. If a grandmother, for instance, is living in the home – we will use their tax returns to be certain that they claim that address, and that their income (even if they are not on the mortgage) will put the maximum household income over the limit. If a College student, for instance, is living with a family member while attending school – we need to document enrollment, and that they are living there.

Income to be verified with a written VOE and one month’s current pay stubs, OR one month’s pay stubs and two years of W2’s.

2/1 buydowns qualifying ratios are calculated using note rate.

Debts with more than 6 monthly payments remaining must be included in qualifying ratios

Eligibility Income – Includes all income (salary, tips, bonus, overtime, alimony, child support, etc..) received by the applicant and co-applicant(s). This income is used to calculate qualifying ratios.

Adjusted Income – This is the applicant’s eligibility income less the total of any of the following deductions applicable to the loan. Income from all household members must be included in the total adjusted income. This adjusted income must not exceed 115% of the median household income for the area.

Allowable Deductions to Determine “Adjusted Income”:

Each minor child under 18 years of age: $480

Each disabled or handicapped individual who is not the applicant or co-applicant: $480

Each full time student 18 years or older: $480

Each elderly (62 years of age or older) or disabled applicant: $400

Medical expenses for any elderly family member: Total that exceeds 3% of gross annual income

Child care expenses for children 12 years old or under: Actual cost of care, supported by full documentation of cost

Remember that in addition to these Income Calculations, you must also meet the Minimum Income Requirements for USDA for the County you want to purchase a home in. Also, USDA requires that the Property be located within the USDA Foot Print for that County. In many of NC’s Counties – the whole county qualifies for this 100% mortgage loan! Unlike FHA, there’s no maximum loan limit with USDA – it’s a matter of what you qualify for.

About Eleanor Thorne

I see myself differently than most loan officers in the Cary/Raleigh market. As a rare Cary native, I see myself as an expert on the area, on mortgage industry changes & factors that effect rates! I've lived in Cary since 1968 - and I'm second generation "mortgage." I work with my husband, Steve Thorne Mortgage Loan Originator #60596 Equal Housing Lender

Comments

As of today – USDA Home Loans in NC are on a 10 business day turn time. We expect those times to get better by June… and then go down hill again as we approach the next deadline of September, when maps are likely to change.

USDA is currently underwriting loans they received in NC on August 8th, 2013 – so it’s at LEAST a three week underwrite here in NC right now. As long as your file is IN THE USDA Office by close of Business on Sept. 30th – you will not be affected, if the maps change.

It’s really hard for us to say – but most lenders have submitted their files to USDA. Steve thinks the week of the 23rd is a good guess – I’m thinking it will be after the 1st of October. Sorry I can’t be better with an answer 🙂

The Maximum Total Debt ratio should be 43% – however, we have the ability to do a Manual Underwrite – and request a Debt Ratio Waiver. We also use the Mortgage Tax Credit to reduce debt ratios.For a family of 1-2 people the maximum income for Gaston County is $75,000. For a family with 3+ people the income cap for Mortgage Tax Credit is $85,000. If you use the Tax Credit with a USDA Loan, the maximum sales price is $240,000. We do USDA Loans in Gaston County – if you have questions, or would like to get pre-qualified, please call us at 919 649 5058

Does overtime income count againt the income limit,since it is not guaranteed income? We would be over the limit in recent years if it counts. But next year i could be back to 40 hour checks each week.

Brandon – that’s a roll of the dice. We’ve seen it go both ways. It will depend on what overtime you are currently getting, and what we can document about future probability. There are income adjustments USDA Underwriters allow to take, that reduce the annual income. The best thing to do is call us. Our number is 919 649 5058

If the payments are guaranteed to last over a couple of years – then yes. If you have to apply for them annually – then we will likely need to look at another program. Call us at 919 649 5058 for more specific details.

Moved here last April. Husband has been continuously employed before, during and presently. His job is 100% commission. He is on track to make $115K this year. It’s just the two of us. Would we qualify for a USDA Ioan in Raleigh, NC as far as his employment is concerned?

You might qualify, but without seeing your complete picture I can’t give you the whole answer. If you’d lie for us to give you advice, please call us at 919 649 5058. We give folks advice on their home ownership strategy everyday.

With this type of loan is there a penalty for paying your house off early? Also is this loan like the old FHA loan where your payments change yearly according to your pay? If so how has this loan changed from the old FHA home loans? Im asking because I have heard of a couple of people loosing there home due to the amount that it went up over the years. What other bills are taken into consideration when setting a payment for the following year?

Laura, great questions!!! The USDA Home Loans are all level payment, 30 year fixed loans. The total payment is comprised on Home Owners Insurance, Taxes, the Mortgage Insurance Fees that USDA Charges and the payment of the loan. When qualifying you for the loan we are looking at debts that include car payments, boat payments (etc) and credit card debt. We are not considering child care or light bills, phone, etc. We would be glad to talk to you about the significant differences between this program and the old GPM (Graduated Payment Mortgage) that FHA use to offer. 919 649 5058